Focus on performance more crucial as DoD's budget growth cools

Jim Albaugh
President and CEO
Integrated Defense Systems


As we at Boeing Integrated Defense Systems complete our business plan for 2006, it's a good time to reflect on where we are as a company. Boeing has grown to be the largest aerospace company in the world anchored by two outstanding businesses, IDS and Boeing Commercial Airplanes. Our focus on the commercial airplanes market, along with our commitment to the defense, space and intelligence communities, has helped Boeing grow profitably despite the challenging environments our customers face.

Following Sept. 11, 2001, we experienced a major decline in the number of commercial airplane orders as customers struggled to adjust to the new realities of air travel. On the defense side, the U.S. Department of Defense budget grew at a compound annual growth rate (CAGR) of 10.6 percent from 2000 to 2004, during which time Boeing won new contracts and increased orders for existing programs. Four years after 9/11, commercial sales are on the rise, and we've introduced the airplane that will define the future of flight—the 787. Conversely, our military customer, faced with the challenge of paying for the costly war on terrorism, is now anticipating that the top-line budget CAGR will be a modest 4.1 percent over the next five years.

While Boeing is well-positioned to handle these market realities, the challenge of a flattening DoD budget is something we are looking at very closely. Our customer expects, and will demand, that we keep our programs on budget, on plan and on schedule. They count on us to be open and honest with them regarding program performance, including sharing any issues that need attention before they become problems. And they rely on us to provide them with the quality and service they have come to count on from Boeing.

The current DoD budget environment also makes the need for acquisition reform even more important. Acting Deputy Secretary of Defense Gordon England is answering that call with a major review of the process on behalf of Secretary of Defense Donald Rumsfeld and the 2006 Quadrennial Defense Review. Boeing is doing its part to provide input about the current process, an often labor-intensive, risk-averse endeavor that challenges the ability of the DoD and industry to provide solutions to the men and women in uniform quickly and efficiently. Recently I had the opportunity to address the members of the Defense Acquisition Performance Assessment (DAPA) Project and shared my thoughts on the need for speed and adaptability in the process, a renewed emphasis on performance and results, and the imperative of public accountability.

Speed and adaptability. There is no question that today's threat environment demands the process move faster and be more efficient while providing the right capabilities. The process should limit unnecessary constraints and allow programs and contracts the flexibility to deal effectively and efficiently with evolving technology, requirements and program risks. Adopting common standards and open systems will minimize single point failures or being locked into one particular approach, requiring costly redesign for upgrades, while also driving interoperability and supporting joint operations.

Performance and results. Any process is ultimately judged by the results it produces. The acquisition process should establish a limited number of success measures, set realistic performance requirements and identify risks, and budget to realistic estimates. In each area the government and contractor must begin as partners in agreeing on mutual expectations, respective responsibilities and clear metrics while addressing risk issues, including the maturity of technology.

Public accountability. Finally, and perhaps most important, it is essential that the implementation of a new acquisition process restore public trust. All of us at Boeing clearly understand that trust is earned and can be lost with great impact on individuals, companies and our nation's security. The acquisition process must be transparent, allowing policymakers and the public to have faith that tax dollars are being spent wisely and honestly.

Changes to the DoD acquisition process will take the concentrated time and efforts of all leaders of aerospace—in government and in industry. The DAPA Project is off to a good start in gathering data for a top-to-bottom review of defense acquisition. We eagerly await their recommendations later this year.

Meanwhile, the challenges of a slow-growth DoD budget will require everyone within IDS to put even more focus on performing on their programs and meeting their goals while maintaining an unwavering commitment to doing the right thing and acting in accord with the values that we share as an organization and as individuals.